China's strategy of investing massively in solar panel production in order to dominate the industry globally doesn't seem so hot now. A recent NY Times article quoted a Chinese bureaucrat with the country's top economic planning agency saying that it would be good for China if two-thirds of its solar panel producers died out and only one third survived.

That's likely if China can't generate more global demand. In the final analysis, China grabbed a market by the throat, flooded it with cheap panels, then the market went south. The central planners in Beijing probably never considered persistent cheap and plentiful natural gas supplies, which are really hurting solar sales.

"The central planners in Beijing probably never considered persistent cheap and plentiful natural gas supplies, which are really hurting solar sales"
Is it?
Photovoltaics supply electricity, but while natural gas is used to fire many of the generating plants that produce electricity, oil is a negligible factor and I believe the majority of plants are still coal fired.
The issue in terms of electricty cost in the US isn't the fuel used to turn the generators - it's the ferocious cost of building and operating the plant, and building and maintaining the grid over which power is distributed. It's a classic capital intensive business, where a lot of the costs that determine the price at which you must sell are amortization of the cost to build the production capacity to begin with.
Beijing's central planners suffered the critical blind spot unsurprising in an economy shfiting from "domestic command" to "international market". Lots of Chinese companies saw an opportunity in photovoltaics, jumped in to produce them, and glutted the market. Prices fell to where they are below production costs, even for China. Chine is seeing the boom and bust cycle common to semiconductor electronics. (DRAM, anyone?)
If you are only concerned with a totally planned domestic economy, you know exactly what demand and supply will be, because you stipulate both as part of your planning. In an international market economy, you *don't* know what demand will be, and you make your best guess as to what you must be able to produce. The Chinese are still figuring out forecasting demand that *isn't* government mandated, and many of those solar firms will go belly up or be acquired as competition continues.
Welcome to competition and market based economies, China. It will be a learning experience for you.

I think you mean $500 *million*, which is what Solyndra got from the US government, and is not even visible on the government's bottom line.
You can argue the government screwed up by extending the loan at all, but the amount is relative chicken feed.

The solar power industry’s problem is not China, it’s economics. It costs too much. It’s not competitive. Its survival depends on government subsidies. Governments are beginning to recognize that solar is not nor will be competitive and are gradually reducing subsidies. The solar power industry assumed the cost of electricity would increase with the addition of carbon pricing coupled with tight fossil fuel supply. In other words, environmental costs and fuel costs would increase the cost of electric power to the point where solar would be competitive. The problem with this reasoning is that it ignores the benchmark for clean electric power, nuclear. Safety concerns notwithstanding, nuclear power sets the bedrock price for clean electric power. Even if the cost for the solar cells were zero dollars/watt, solar compared to nuclear is too expensive.

Solar is another example of "second-generation innovation" by China in which huge amounts of resources were poured into what central planners believed was a profitable market. Too many Chinese solar panel makers got too much money from Beijing, and now, as you point out, they are paying the price.

The pitiful state of the grid is going to be the largest barrier, beyond tariffs or even batteries. Renewables tend to be available only in specific places, rarely where demand is.
Here in Washington State you would think our plentiful wind and water should play well together, since water is an ideal storage system with rapid demand scaling. However, we have times of high wind where we idle the mills and use hydro, because our grid works for hydro but is not able to deliver wind power to where it is needed.
The building of grids however is capital intensive and a long term return. Which is not a good match to new technology like wind or solar which is rapidly changing. Perhaps in a few places the investments in grids make sense because they pay off under multiple scenarios, but those which involve long spurs (like the Pacific coast for wind) for single purpose are going to make any investor nervous.

I did assume that operators like Bonneville Power had a better handle on how to integrate hydro and wind into the NW grid. Sounds like most of these outfits are unwilling to take a risk in order to upgrade the grid.